Mid-Continent Casualty Company is demanding that Federal Insurance Company pay back more than $400,000 in defense costs after a bruising legal fight over who should cover a Texas oil executive’s defamation lawsuit.
In a complaint filed in the U.S. District Court for the Northern District of Texas, Mid-Continent alleges that Federal Insurance failed to defend William Francis, the CEO of Incline Energy Partners, L.P., in a lawsuit brought by Adam Ferrari. The dispute, which pits two insurers against each other, centers on which company was obligated to defend and pay legal costs for Francis in a suit that has since been dismissed.
The underlying lawsuit, Adam Ferrari v. William Francis, accused Francis of engaging in a targeted campaign to harm Ferrari’s reputation after Ferrari founded his own energy company. According to the complaint, Francis, as CEO of Incline, allegedly sent communications, emails, websites, and packages containing false and defamatory information about Ferrari to several parties in 2021 and 2022. These included First International Bank and Trust (“FIBT”), Dalmore Capital (“Dalmore”), 4 GRLZ Investments, LLC (“GRLZ”), and the Financial Industry Regulatory Authority (“FINRA”). Ferrari alleged that Francis made statements that Ferrari was a felon, was acting as CEO of Phoenix Capital Group Holdings, LLC, and was defrauding mineral owners and investors.
Ferrari claimed that these actions harmed his personal and business reputation, caused financial injury, and resulted in investigations by third parties. He sought actual damages, exemplary damages, consequential damages, compensatory and/or special damages, costs of court, interest, and permanent injunctive relief. The lawsuit was ultimately dismissed and is not currently pending.
Mid-Continent states that it defended Francis under a reservation of rights and paid over $400,000 in defense costs after Federal Insurance refused to participate in the defense or fund any portion thereof. Mid-Continent now seeks a declaratory judgment that it had no duty to defend Francis, that Federal Insurance had the duty to defend, and that Federal Insurance should reimburse Mid-Continent for 100 percent of the defense costs paid.
The complaint details the relevant insurance policy clauses. Mid-Continent issued a commercial general liability policy to Incline Niobrara Partners LP with limits of $1,000,000 per occurrence and $2,000,000 in the aggregate. The policy states: “We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply.” According to the complaint, Incline Energy Partners, L.P. is not a named insured under the Mid-Continent policy, and Francis was sued for acts as CEO of Incline Energy Partners, L.P.
Federal Insurance issued a Directors and Officers and Entity liability policy to Incline Energy Partners, L.P., with a $10,000,000 limit. The Federal Insurance policy contains an “other insurance” clause: “If any Loss under this Coverage Part is insured under any other valid and collectible insurance policy… this Coverage Part shall be excess of and shall not contribute with such other insurance, regardless of whether such other insurance is stated to be primary, contributory, excess, contingent or otherwise.” Federal Insurance has asserted that its policy is excess to the Mid-Continent policy, but Mid-Continent disputes this, arguing that its own policy does not apply and that Federal Insurance’s coverage should be primary.
Mid-Continent seeks a declaration of the parties’ rights and obligations under the respective policies, reimbursement for defense costs, and attorney’s fees.
The case highlights the complexities of overlapping insurance coverage, “other insurance” provisions, and the financial stakes when multiple carriers are involved in defending executives in business litigation. As of the filing, the underlying defamation lawsuit has been dismissed, but the coverage dispute between Mid-Continent and Federal Insurance remains unresolved.
